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Here's why Budget 2021 should increase section 80C limit?

Mini

Several experts have asked the government to increase the maximum limit for deduction under section 80C of the Income Tax (I-T) Act to Rs 2.5 lakh from the present Rs 1.5 lakh.

Here's why Budget 2021 should increase section 80C limit?
Several experts have asked the government to increase the maximum limit for deduction under section 80C of the Income Tax (I-T) Act to Rs 2.5 lakh from the present Rs 1.5 lakh.
Union Budget 2021-22 will be presented on February 1 by Finance Minister Nirmala Sitharaman, which will be the third Budget of the Modi 2.0 government.
Currently, as we know, section 80C allows a deduction from gross total income (before arriving at taxable income) of up to Rs 1.5 lakh per annum on eligible investments and specified expenses. This limit was last fixed in FY2014-15 and no changes have been made thereafter.
Sandeep Sehgal, Director - Taxes and Regulatory, AKM Global - a consulting firm, says raising the section 80C limit will boost investments further and increase tax savings for an individual. "A clear distinction is to be made for encouraging long-term savings," Sehgal stresses.
Stating another reason for increasing the limit, Sehgal adds, is to drive forward the consumption levels for an individual taxpayer, which is also the need of the hour. "Over the years, the 80C limit has not kept its pace with the inflation and thus, needs a revision,” Sehgal believes.
Gopal Bohra, Partner at NA Shah Associates seconds Sehgal's views.
"The interest income on investments has also reduced. Hence, it becomes more relevant for government to increase the limit of deduction under section 80C so that this will generate more disposable income in the hands of the taxpayer," he says.
The Institute of Chartered Accountants of India (ICAI) also thinks that the increase in quantum of deduction under section 80C may provide savings opportunities to the public at large.
As per CA Aditya M Agarwal, Partner, Mahesh K Agarwal & Co. and Secretary, Professional Times, this year proves to be the best year for the said increase.
Currently, a taxpayer making a payment towards a life insurance premium is allowed a deduction under section 80C. "We have seen the people at large realizing the importance of insurance in the COVID-19 times. There are people who have increased their insurance amounts and those who were not insured have taken policies in light of the pandemic. So, any policy measures in this area in Budget 2021 shall certainly be much appreciated and taken as positive support from the governments towards the health of the country," Agarwal opines.
"Great tax-saving measures towards insurance in 80C would also help in increasing the insurance penetration in tier-2 cities where a lot of people are still uninsured," he adds.
The country has seen a hard stop in its economic growth during the lockdown times and a revival by reinitiating the infrastructure bond investments in 80C, Agarwal further tells, can help in bringing investments in the infra sector which is the base for any economy to grow.

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